What happens if you file late? KRA penalties explained

## The cost of filing late in Kenya

KRA imposes two separate penalties when you miss a filing deadline:

Late filing penalty — for not submitting the return on time

Late payment interest — for not paying the tax on time

Both penalties run until you file and pay.

PAYE penalties

Penalty type	Amount
Late filing	KES 2,000/month (or 25% of unpaid tax — whichever is higher)
Late payment interest	2% per month on outstanding PAYE

Example: If you filed PAYE 2 months late with KES 50,000 due:

Late filing penalty: 2 × KES 2,000 = KES 4,000

Late payment interest: 2 × 2% × KES 50,000 = KES 2,000

Total penalty: KES 6,000

VAT penalties

Penalty type	Amount
Late filing	KES 10,000 (even for nil returns)
Late payment interest	2% per month on outstanding VAT

VAT penalties are significantly higher than PAYE — KES 10,000 for each missed return, even a nil return.

Annual income tax penalties

Penalty type	Amount
Late filing	5% of unpaid tax (minimum KES 2,000)
Late payment interest	2% per month

Corporation tax penalties

Penalty type	Amount
Late filing	5% of unpaid tax
Late payment interest	2% per month
Late instalment tax	2% per month on shortfall

Withholding Tax penalties

Penalty type	Amount
Late filing	KES 10,000 or 5% of tax — whichever is higher
Late payment	2% per month

What to do if you have missed a deadline

1. File immediately — the late filing penalty stops accumulating once you file, even if you cannot pay yet.

2. Pay what you can — the 2% interest runs on the outstanding balance. Any partial payment reduces the interest.

3. Apply for a payment plan — KRA can grant payment arrangements for large tax debts. Contact your local KRA office or your tax consultant.

4. Consider the Amnesty Programme — KRA periodically announces amnesty periods where penalties and interest are waived. Check the KRA website or ask your consultant.

The most important rule

Always file, even if you cannot pay.

The late filing penalty and the late payment interest are separate. Filing without paying stops the late filing penalty from growing — the interest on unpaid tax is usually cheaper than letting both penalties accumulate.